The Phantoms Of Faridabad

It takes much effort to locate the two-storey house in a residential colony in Sector 7 of Faridabad, near Delhi. The nondescript building, covered with a layer of yellowish paint, is one of many in a lane cluttered with similar houses. What’s peculiar about the building? Until recently, it was the registered office or regional office of more than 130 chit funds. What’s more peculiar is that all those funds operated not in the Haryana town but far away in Kerala.

With chit funds in the news for all the wrong reasons recently, the owner of the house is reluctant to talk. The owner, who does not wish to be named, moved to Faridabad in 1998 to work in a factory. “We have nothing to do with chit funds. We had just rented out a room in the house to these funds,” he says over the phone from Thrissur, Kerala. When pressed further, he says initially there were only four or five funds using his house as their address. Over time, the number of funds surged. Many funds had been using his address for more than seven years and held their meetings occasionally in the house as and when required, he says. The owner also used to receive the post that came for any of the chit funds and forward it to their operational offices in Kerala, he adds.

The house is one of several in Faridabad’s residential areas that became a refuge of hundreds of chit funds based in Kerala after the southern state enacted the Kerala Chitties Act, 1975. The law tightened rules with an aim to regulate the savings and credit schemes and protect subscribers’ interests. This led to an exodus of chit funds from Kerala to other states, especially to Jammu and Kashmir and Haryana, where similar laws were not promulgated at the time.

Faridabad became a hub of Kerala-based chit funds as it already had a lot of Malayalees, making it easier for the funds to find a place to set up their offices. A.V. Philip, General Secretary of the Faridabad Malayalee Association, says that people in large numbers from Kerala started migrating to Faridabad from 1970s. “It was the number one industrial town in the country. Today, there are more than 60,000 Malayalees in Faridabad.”

While they set up their branch or regional offices in Faridabad for legal purposes, the funds continued to conduct their transactions in Kerala, says David Kannanaikkal, General Secretary, All Kerala Chitty Foremen Association. “This primarily is the case with small and medium-sized chit funds and is done to bypass the relatively stringent laws and regulation in Kerala,” he adds. The association estimates the chit fund business in Kerala is around Rs 85,000 crore, with most of them based in Thrissur district. There is no estimate for the number of Kerala-based chit funds with offices in Faridabad. But according to the association, at last count in 2002, there were about 10,000 chit funds operating in Kerala with offices outside the state, primarily in Faridabad and Jammu.

One of the chit funds with a branch office in Faridabad is Thrissur-based Pooram Kuries. Its Chairman, Anil Kumar, says Pooram started operations in Faridabad in 1995. “Our main subscribers are in Kerala. We started operations here because there were no difficult laws regulating chit funds here.” He adds that the town’s local people don’t invest in Kerala-based funds. Most funds do not even have any boards or name plates outside their offices. One of the few which have a board outside its office is Gokulam. The chit fund is registered with authorities and operates in several states. But its office in Faridabad, located in a prime commercial location, wears a deserted look with just one staff member.

Many locals are not even aware of the presence of these funds. Sanjay Kumar, Joint Commissioner of Police, Faridabad, says some unregistered local funds may have been operating in the town but the police have not received any complaints or information about the presence of Kerala-based funds using local addresses.

These chit funds received a setback last year when the Chit Fund Act of 1982 was extended to six states — Haryana, Nagaland, Tripura, Arunachal Pradesh, Kerala and Gujarat. Many funds are weighing their options. The owner of the Sector 7 house has returned to Kerala and says 90 per cent of the funds operating from his residence have moved out. “I want to sell this property and to have nothing to do with chit funds,” he adds.

RBI rules are stifling NBFCS

We need a large number of financial institutions which offer safe and reasonably remunerative return on investment to protect investors’ interest. At most times, our regulators actually stifle the industry and drive out good players.

Look at what happened in 1998 in the aftermath of a few non-banking financial companies (NBFCs) such as CRB Capital Markets collapsing. The Reserve Bank of India (RBI) came out with a very stringent and unimaginative set of rules that almost finished off the sector. A lot of large companies such as the Tatas and others who were in the NBFC business till then chose to exit the sector.

Too much of micro management drove out good players (and continues to do so even now). Had that not happened we would have had over 50 large finance companies competing among themselves.

Nature abhors a vacuum and it is this vacuum that unscrupulous players come to occupy. Financial illiteracy is high in India and we need hundreds of strong institutions.

In the absence of this, more people fall prey to ponzi schemes. It is not the lack of regulation that is fostering such scams but unbridled RBI regulation.

Cloud Computing: Effectively Changing The Business Operation Model

Cloud computing technologies are ubiquitous. While not exactly new technologies, the speed with which they’re transforming business models and efficiencies seem to have accelerated over the past few years. The reason for the transformation depends on how the business operates and its specific needs, but there are some major trends that have emerged.
It All Started with Employees

Employees are one of the main driving forces behind many changes related to cloud computing within the business environment. Employees have families, want to work from home or even use devices with which they are most comfortable. Cloud computing has made it easier for remote employees to enjoy all of the benefits of working in an office (collaboration, Hosted Exchange email, access to documents, etc.) while they are working from home or even on the road.
While Yahoo YHOO +0.52%’s Marissa Mayer may have made the directive for employees to come into the office, most businesses, on the other hand, are seeing the benefits of allowing their employees to work remotely, namely that those employees are more productive. They’re more efficient and willing to work longer hours because they have the privilege and flexibility of working remotely.
For employees that do decide to come into the office, many want to bring their own devices because they prefer or are more familiar with them. Cloud computing is also accelerating the Bring Your Own Device (BYOD) trend, allowing employees to virtually “dial into” their corporate systems with their own computers or tablets Cloud computing gives employees these freedoms without IT having to worry about these different machines or the remote access overloading and crashing their on-site infrastructure.
Shaking Up Your Standard Business/IT Model
Speaking of IT, cloud computing has unburdened businesses from the traditional IT business model, giving them more options when it comes to their IT infrastructure. In the past, the business/IT model was very straightforward: Businesses hired IT professionals to run their computer hardware and software. The IT staff had to forecast business needs as far out as 5 or 10 years, and make purchases accordingly.
The problem with this business/IT model was that oftentimes the forecasts were wrong. We’ve all heard horror stories of IT forecasting. For example, IT may forecast that a business will only need a certain amount of data storage for the next five years and only purchase the forecasted amount, without considering growth, more personnel or even just more demand on the system. Then after only a year, IT realizes that they’re on the verge of running out of storage and need to purchase more.
With cloud computing, you never have to worry about running out of storage or server capacity, resulting in major cost savings. While you still need to forecast the amount of storage or server capacity that you may need, you no longer have to be overly concerned about the capital expense of scaling up your needs if you do require more space or capacity. It’s far less expensive and less of a hassle to increase cloud storage and cloud server needs than on-site infrastructure. You still need IT for many functions, but cloud computing may actually result in less of a need for a full-blown IT staff. You’ll be outsourcing most of your activity to a cloud vendor. While your IT staff may not be as robust in the past, they’re still necessary for business innovation. With standard maintenance and upgrades off of their plate, IT professionals can find time to create new technologies and products for your company. Take the Toyota example.
Toyota Has Seen the Impact of Using Cloud Applications
In a recent article by Julie Bort “To Understand Just How Much the Cloud Will Change the World, Look at Toyota” on Business Insider, she profiled Zack Hicks, Toyota’s CIO, North America. Hicks has been leading the efforts at Toyota to embrace cloud computing, including moving his entire team to Microsoft MSFT +1.54%Office 365, which includes Hosted Exchange Email and Microsoft Office, and a number of other cloud applications to improve productivity. The real advantage of using this type of software is that the team no longer has to worry about day-to-day maintenance of software, including verifying that everyone is using the same version of email.
These cloud applications have allowed Toyota to streamline their business, providing their IT teams with more flexibility to actually create new technologies for their cars. Hicks sees cars as the next type of connected platform with a whole range of technologies to help people in their day-to-day lives, including:
Semi-autonomous vehicles that can help the elderly get around
Steering wheels that “can measure your heartbeat, respiration, blood-sugar levels, and send it to a doctor”
Cars that can send an alert if a driver’s health condition has become unsafe and needs medical help

Your Customers Demand that You Change
Another way that cloud computing has changed business models is in the way that you interact with customers. It gives you the flexibility to immediately react to customer needs as soon as the customer wants you to. Customers no longer wait for business hours to shop for products or get the services that they need. They expect it 24/7. Plus, they want a more robust experience that often means websites with videos, tools and interactive presentations. Most medium to small businesses don’t have the internal bandwidth to host these interactive files.
Outsourcing your interactive data to a cloud vendor ensures that you have enough capacity to not only store these files, but guarantee that customers can download or view the files at higher speeds from a secure cloud computing platform.